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How to grow a small business – Lessons from Goldman Sachs

06 Dec 2013

Outlandish has come a long way from the kitchen table it started around. We’ve grown up and left home and now, thanks to the excellent 10,000 Small Businesses course from Goldman Sachs and UCL, we know where we’re going.

In November 2010, when Harry and Tam formed the company the aim was to be little more than freelancers that cooked each other lunch. It didn’t work out like that, and now there are seven full time Outlanders and a bunch of Outsiders that help us out on an ad-hoc basis.

One thing we’ve realised is that there is more to running a grown up company than cooking each other lunch. Projects get more complex, clients expect more, staff and suppliers want paying promptly and you end up with a bunch of facilities and assets to look after.

Being bigger means having more systems. While three people can keep each other up to date on all their projects and company admin, it’s much harder and less efficient for larger organisations.

communications are much more complicated in larger teams

While we’ve done pretty well at growing our team (at around 50% per year) we’ve done even better at building up a whole bunch of lovely and happy clients. Obviously we’re jolly happy about this, but it means that we’re super busy. Over 75% of our clients come back to us for future phases of existing products we’ve built for them or for completely new projects. To make matters ‘worse’, almost all of our clients have referred someone else to us at some point or another.

At the beginning of 2013 we set ourselves some key goals:

  • make sure we can deliver all the work our existing clients need and still have space to do new fun stuff
  • develop the systems we need to be able to work effectively with a range of freelancers and other companies
  • develop a business strategy that will allow us to grow both larger and more efficient while remaining sustainable

To help with the last point I sent of my application to the Goldman Sachs/UCL 10,000 Small Businesses programme which is a 100 hour course “designed to unlock the economic and job creation potential of small businesses and social enterprises operating in the United Kingdom”. It’s basically the sort of content you’d expect to find in an MBA.

10ksb

The course was amazingly useful. As a right thinking member of society, I’ve always assumed that MBAs and the academics that run them sit in gold-inlaid ivory towers plotting ways to screw over the poor, but it turns out that in their spare time they come up with various insights that are useful to the good guys – at least those that run businesses.

1. The numbers aren’t just for the accountants

Our accountancy software (FreeAgent) has a tab called ‘Accounting’ which I always assumed was for accountants so that they could keep the tax man happy. It turns out that this is where you find out whether you’re going to go bust or take over the world. I think the tab should be renamed.

money

2. Beware of the suicide box

A Russian bloke called Igor Ansoff discovered that we all live in a simulated world controlled by futuristic machines and went on to develop the Ansoff Matrix. It’s basically a two-by-two grid that describes ways that businesses can grow.

ansoff-matrix

The upper-left box in the diagram to the left describes doing what you do currently – providing the same product(s) to the same markets.

The top right box describes providing new products for existing clients – for us that might include providing branding consultancy for clients, which we haven’t focused on in the past.

The bottom left box describes doing what you currently do for new markets – for us that could be selling to a new sector – such as health – or a new place – such as America.

Ansoff’s final box, which he labelled ‘diversification’, is also – and probably more helpfully – known as the suicide box. Basically, if you start making a new product for new people you’re basically starting a completely new business from scratch which you know nothing about, even if the activity seems related. For us this would be something like building mobile phone apps (which we don’t normally do) for consumers (who we don’t normally sell to).

While this doesn’t tell us exactly how we should grow the company, it does help us identify some of the various ideas that have been suggested as potentially risky.

3. It’s the people

Over 90% of Outlandish’s costs are people, and getting the right ones and training them well is essential. Since starting the course we’ve recruited two new people – coding genius (but awful tea maker) Hanna Laakso and hot-shot designer/Miley Cyrus-expert Matt Crow. Both have brought vital skills to Outlandish and, more importantly, fantastically Outlandish attitudes. We recruited them with the help of the fabulous Jayne Morris of TPP Not For Profit who helped us with psychometric profiling (which sounds evil but is in fact quite fun). You can see my DISC profile here which is worryingly accurate considering I only had to answer about 20 questions in order to generate it.

4. Don’t lose sight of your goals

IMG_3878While the 10,000 Small Business Course was amazing and I learnt a tonne and met some of the nicest people ever. However, we reaffirmed the following:

  • Outlandish isn’t about profit. We need to eat and pay the bills, and have a bit left over for our pro-bono work and fun projects, but we should never let profit be the driving goal. That’s the advantage of not having shareholders.
  • We should only grow if there’s a good reason – we need to help our clients, do nice projects for charity and save as many people as possible from their boring jobs by employing them somewhere fun, but it’s not growth itself that we’re after.
  • Get out there to learn and do. I had a fabulous time meeting so many great people and learning so much new stuff. We’re all going to do a lot more of this from now on.

And yes, the image is of me presenting my business plan to Goldman Sachs and my course mates wearing a rare combo of hammer and sickle T-shirt and tailcoat. You’ve got to do that sort of thing when you’re an Outlander.